This review of the finances of Michigan school
districts based on locale groups should provide a useful new perspective on
district revenues and expenditures. While
this Policy Study is not designed to analyze the possible policy consequences of
the data related here, a few general observations seem appropriate.

For example, the notion that districts located in
cities generally do not have the same fiscal resources as suburban and other
districts is not supported by recent data. In per-pupil terms, the city locale
group received more revenue and spent more operating money than the suburban,
town and rural locale groups. Of course, this fact does not answer the question
of whether urban school districts’ revenues and expenditures are “too high,”
“too low” or “just right”; it simply provides a clearer factual basis for that
discussion.

This analysis also suggests that smaller districts and
districts that spend less per pupil are more likely to devote a larger portion
of their operating expenditures to instruction. In 2010, town and rural
districts on average dedicated about 63 percent of their operating budgets
to instruction, compared to averages of 61 percent for suburban districts
and 58 percent for city districts. From 2004 to 2010, the town and rural
locale groups also reduced the percentage of their operating expenditures
dedicated to general administration, school administration, operations and
maintenance, student support services and instructional staff support services.

It is also noteworthy that unlike other operational
spending categories, per-pupil instruction and food services expenditures grew
substantially in all 12 locale subgroups from 2004 to 2010 — for
instruction, by at least 14 percent for each subgroup, and for food
services, by at least 13 percent for each subgroup. In other basic
operational spending categories, such as general administration or operations
and maintenance, one or more of the locale subgroups decreased its per-pupil
spending.[*]

Finally, it should also be remembered that the data above
focus exclusively on revenue and expenditures — in other words, money. The data
do not involve district performance in such areas as student achievement,
school safety, parental satisfaction or employee retention. Hence, the revenue
and spending data analyzed here, while valuable in illuminating differences
between various locale groups, can do no more than provide perspective on
school district operations and performance. They are simply part of the picture
— not all of it.

[*] This statement excludes only the “all support services” category, which
subtotals a number of support services expenditures and masks declines in some
areas through offsetting increases in others. Two other categories showed
nearly universal increases. Per-pupil operating expenditures for school
administration and for student transportation increased in 11 of the 12 locale
subgroups from 2004 to 2010, with the exceptions being DPS (-28 percent)
and the midsize city subgroup (-2 percent), respectively.